Customer Experience Drives Revenue Growth, 2016
In 2015, we explored whether customer experience really matters to business success or whether CX is just the latest hype. Our conclusion: superior CX drives superior revenue growth in industries where customers are free to switch business and competitors deliver a differentiated customer experience.
This year we repeated our study to see if the results held true across an additional year of data. To do that we compared five pairs of publicly traded companies where one company in each of the pairs had a significantly higher score than the other in Forrester’s Customer Experience Index during the period 2010 to 2015. Then we gathered financial data from company SEC filings like Forms 10-K and 10-Q.
The tough part was normalizing the results. We focused on isolating revenue that could be traced directly to consumer behavior; we also backed out revenue from mergers and acquisitions, revenue from sale of assets, and other windfalls.
Once we normalized the revenue data we used it to build models that calculated the compound annual growth rates (CAGR) for the ten companies from 2010 to 2015. We found that the CX leaders in all five pairs of companies outperformed their relative CX laggard counterparts.
In two industries, cable and retail, leaders outperformed laggards by 24 percentage and 26 percentage points, respectively. Even in the industry with the smallest spread, airlines, the CX leader enjoyed a healthy 5 percentage point advantage in global revenue. And when we compared the total growth rate of all CX leaders to that of all CX laggards we saw that the leaders collectively had a 14 percentage point advantage.
Now, we realize that correlation is not causality – there could be something going on here other than CX driving the revenue growth. But we do know from our analysis of CX Index data that customers who have a better experience with a company say they’re less likely to stop doing business with the company and more likely to recommend it. Both of those factors should drive increased growth in customers and, in turn, increased growth of customer revenue.
So do we also see increased growth in customers for companies with superior CX? Yes. And that connects the dots. It also provides good enough evidence to make an informed business decision to invest in creating a superior customer experience as a way to drive superior revenue growth.
For more about the correlation between CX and revenue growth, see our new report, “Customer Experience Drives Revenue Growth, 2016,” or watch our on-demand webinar, “Winning On the Battleground Of CX.”